If you are a long term investor, you tend to always make returns in equities. In fact, equity shares have known to outperform other asset classes in the long term. We have selected a few stocks that offer great opportunities for long term investors in 2018. These include stocks that have a very low debt to equity ratio and which have shown good growth over the years. These stocks have the tremendous potential to generate money in the long term.
Here are a few stocks that are from sectors such as consumer, media and banking.
Motherson Sumi Systems (MSSL), is a part of the Samvardhana Motherson Group. MSSL including its subsidiaries and JVs is one of the leading manufacturer of automotive wiring harnesses, mirrors for passenger cars and a leading supplier of plastic components and modules to the automotive industry.
Recently, the company acquired Reydel Automotive Group, maker of interior components and modules for automobiles, at a cost of Rs 1,300 crore.
The acquisition is likely to diversify the customer base of the company and apart from this, access to a diverse set of capabilities (versus SMP) and also a product line that is similar and includes products like cockpit modules, instrument & door panels, consoles, etc. The buyout would also boost the company's earnings per share in the coming years.
Motherson Sumi: Fundamentally sound
Motherson Sumi is likely to see sharp growth in earnings in the next 2-3 years. In fact, we anticipate 25% FY18-20E EPS compounded annual growth rate.
The stock has also corrected from levels of Rs 396 to the current levels. The shares of Motherson Sumi is now available at a p/e of 20 times EPS of 2020.
Though it maybe slightly more expensive, the high p/e is on account of solid anticipated growth and its new acquisition of the Reydel Automotive Group.
The stock is an attractive buy at the current levels of Rs 351. Check stock quote of Motherson Sumi
D B Corp publishes Dainik Bhaskar, the world's fourth largest circulated newspaper. In fact, the group publications put together make it Urban India's No 1 newspaper group.
In fact, its Hindi newspaper has a staggering 46 editions in 11 states. It also has newspaper in Marathi and Gujarati and also runs the popular radio station "94.3 My FM".
Dainik Bhaskar in Hindi has leadership position in Madhya Pradesh, Chhattisgarh, Rajasthan, Gujarat, Haryana, Punjab, Chandigarh, Maharashtra, Himachal Pradesh, Jharkhand, Bihar & Delhi.
The company is now focussing on digital, where once again it has a leadership position. Bhaskar.com has average daily unique visitors of 4.9 million, which is higher than other competitors, including English language competitors.
D B Corp: Strong growth story ahead
D B Corp is now focusing on several new initiatives to propel growth. In the radio business the company is planning to consolidate its presence to be a market leader in "Unmetro" geographies. 94.3 MY FM continues to be no.1. in markets of Madhya Pradesh, Chhattisgarh and Rajasthan.
The company is now focussing also on the digital business, including videos, speed and quality content.
For the quarter ending Dec 31, 2017, the company reported revenues of Rs 598 crores, which was significantly higher than Rs 568 crores reported in the Sept quarter. The EPS of the company for the quarter ending Dec 31, 2017 was Rs 4.23. We believe that the company can report an EPS of Rs 20 for 2018-19. If you apply a p/e of 25 times, the stock should trade at Rs 500.
Punjab National Bank
The bank is in the midst of a huge fraud, however, it may not be a bad bet to buy into the stock at current levels for a number of reasons. The shares have the bank have lost ground from a 52-week high of Rs 245 to the current levels of Rs 93.
Of course, there is a fraud liability of Rs 12,000 crores on the bank, however, we believe that there are a few positives. Let us examine each of these.
First, let us assume that Nirav Modi does not pay and the entire liability shifts to PNB. We believe the bank can weather the storm. Its capital adequacy is reasonable.
Apart from this, there could be a swift resolution to the NPA problems under the Insolvency and Bankruptcy Code, which could lead to recoveries. Take the case of Bhushan Steel, where creditors may get back amounts.
Various other reasons to buy PNB
The bank has stake in subsidiaries like PNB Housing Finance, PNB MetLife, PNB Gilt etc., which all have tremendous value. Apart from this the company has one of the lowest equity capital among government owned banks and can always raise money through a rights issue.
It is the second largest government owned bank in the country with a branch network of a staggering 7,000 branches. A fantastic franchisee network.
You are getting a stock, which was exactly 5 months ago in Oct trading at Rs 230, now at Rs 93. This is a big reason to be buying the stock.
Yes Bank reported a good set of quarterly numbers for the period ending Dec 31, 2017. The net profit rose by 22 per cent to Rs 1,077 crores, as against Rs 883 crores in the corresponding period of last year.
Yes Bank saw its net interest income, which is income earned from loans, rising 27 per cent year-on-year (yoy) at Rs 1,889 crore. Non-interest income jumped 40 per cent at Rs 1,422 crore.
However, what was a little worrisome was that the gross non performing assets of the bank rose marginally. GNPAs as a percentage of total advances rose to 1.72 per cent from 0.85 per cent in the year-ago quarter. During the quarter, GNPAs increased byRs 254 crore to Rs 2,974 crore.
Check stock quote of Yes Bank here
Yes Bank Cheap on valuations as compared to peers
The price to book and p/e multiple of Yes Bank, is much cheaper when compared to peers like Kotak Mahindra, IndusInd Bank and HDFC Bank. However, the one reason for that is that the bank has larger exposure to corporates, which may have shrunk the valuations premium.
However, the bank is expected to continue to post robust growth in the months to come. The good thing is that the stock has fallen almost 20 per cent from its recent highs of Rs 380.
The stock is also trading at a price to book of just about 2.4 times, which makes the stock attractive at the current levels. The capital adequacy at around 17.8 times is also extremely good. The Yes Bank stock currently trades at Rs 304. The shares maybe a good long term bet, given the fact that the shares are now a part of the BSE Sensex as well.
Yes Bank has been consistently growing at 20 per cent over the last few years. There is no reason to believe that would change. The bank can report an EPS of around Rs 20 for FY 2018-19. If we apply a pe of 20 times for the stock, it should trade at around Rs 400.
Buy the stock with a price target of Rs 400, which should be an upside of 20 per cent in the next one year. However, since the markets are not very far from peak levels, a good idea would be to buy the stock around levels of Rs 320.
Best small cap stocks to buy
In the past some small cap and mid cap stocks have given excellent returns. In fact, small cap stocks have beaten returns from large cap stocks, which have made them excellent bets for the long and short term. Please click on the link to see some excellent small cap stocks ideas.
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